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Directors and trainees can be “workers”

Employment law newsletter: The Court of Justice of the European Union (“CJEU”) recently held that a director and an unpaid trainee may fall within the concept of “worker” with reference to the rules set out in the Collective Redundancy Directive.

If an employer wants to implement collective redundancies there are specific rules governing how such dismissals should be effected. These rules stem from the Collective Redundancy Directive which was implemented in Denmark under The Danish Collective Dismissals Act (lov om kollektive afskedigelser). Amongst other things, these rules make it clear that an employer must notify the competent public authorities before the redundancies take place.

Summary of the case

The case in question concerned a German company which made all of its employees redundant in connection with the solvent liquidation of the company. Amongst the employees who were being made redundant were a director and an unpaid trainee. The trainee did not receive any salary from the company, but received financial support from the German authorities which equated to remuneration for the work she carried out at the company.

One of the redundant employees believed that his dismissal was invalid because the company had not notified the public authorities about the dismissals in accordance with the German rules governing collective redundancies. Under German law, the collective redundancy rules must be followed if a company, which normally employs more than 20 “workers”, makes more than five of these workers redundant.

The company had neither included the director, nor the trainee in the calculation of workers in connection with the dismissals. This meant that a total of 20 workers had not been made redundant by the company and this was the threshold governing when the German collective redundancy rules applied.

The question before the CJEU was therefore whether the director and the unpaid trainee should be included in the calculation of the total number of workers. If they were to be included, then the company had more than 20 workers and the rules governing collective redundancies should have been complied with.

In connection with the proceedings the German court made a request to the CJEU for a so-called preliminary ruling. The German court wanted to know whether a director, who did not hold any shares in the company, and whether a trainee, who did not receive any salary from the company, fell within the category of “workers” in the Collective Redundancy Directive. Under German law the two roles were, in principle, not included in the concept of “worker”.

Opinion of the CJEU

As one of its first points, the CJEU stated that the concept of ”worker” should be given an autonomous and independent meaning in the EU legal order so that the protection of workers is not undermined by national definitions which limit the concept. The very aim of the directive is to protect workers in collective redundancy situations and the worker concept must therefore not be restrictively interpreted.

The CJEU furthermore held that the concept of “worker” must be defined in accordance with objective criteria which distinguish the employment relationship by reference to the rights and duties of the persons concerned. The obligations in an employment relationship are characterised by the fact that a person will, for a certain period of time, perform services for and under the direction of another person in return for which he receives remuneration.

As regards the director, the CJEU emphasised that he was appointed by the general meeting of shareholders which could, at any time, dismiss him and that the director received remuneration for his work. In addition to this, he was subject to the direction and supervision of the general meeting of shareholders and he was therefore in a relationship of subordination. Furthermore, the director did not own any shares in the company. Against this background, the CJEU held that the director should be taken into account in the calculation of the redundant employees.

Finally, the CJEU held that the trainee was also included in the concept of “worker”, as the traineeship was undertaken under the same terms as those for other workers. In this connection, it was irrelevant whether the remuneration was paid by the company or whether it was financed through public grants.

Bech-Bruun’s comments

The judgment shows that the EU concept of “worker” must be construed widely and that directors and trainees can be included in the concept. The Collective Dismissals Act is based on the Collective Redundancy Directive and the Act must therefore be interpreted in accordance with the CJEU’s decision.

This means that any companies contemplating collective redundancies should consider whether, by way of example, their directors or managers employed in similar roles – and who traditionally have not been considered as “workers “ under collective redundancy rules – should now, after all, be included in the calculation of employed workers. Whether this is the case will depend on the director’s actual employment terms, including his or her degree of autonomy, and not least whether the director also owns shares in the company.

The “worker” concept is furthermore also used in a number of other Acts based on EU rules. The CJEU’s demarcation of the concept can therefore also have an impact on not just the interpretation of the Collective Dismissals Act, but also on other Danish legislation which is based on EU rules.

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